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Weak natural-gas prices have slowed growth in the past year for much of the oil and gas industry.
Crosstex Energy LP,
a master limited partnership that gathers, processes, and markets natural gas and natural-gas liquids, and transports crude oil, has been no exception.

The partnership's distribution has been unchanged for the past three quarters, as Crosstex (ticker: XTEX) has been investing in fee-based projects that expand its natural-gas liquids and oil business, where prices have remained relatively steady compared to gas. Some of those projects are expected to come online in 2013, leading to higher cash flows.

The company's general partner,
Crosstex Energy Inc.
(XTXI), offers a good way for investors to benefit from the growth. As a general partner, it owns lucrative incentive distribution rights, which motivate it to manage the LP's assets effectively and grow the distribution. As the distribution increases, Crosstex receives a stepped-up percentage, up to 50%, making it levered to the LP's rising cash flows. In 2011, the company received 27% of all cash distributed.

Crosstex generates all of its cash flow from the distributions, and doesn't own hard assets. As growth projects come online, distributions and dividends could grow significantly. TJ Schultz, who covers Crosstex for RBC Capital Markets, sees the distribution growing 3.4% in 2013 and 11.7% in 2014, while the dividend could increase by 8.3% next year and 33.7% the year after.

Crosstex shares closed Friday at $12.51. In the next year, they could rise 25% or more, and yield 3.8%.

Founded in 2000, Crosstex owns a 2% general partner interest; 22% of the LP's units, and all of the incentive distribution rights. The LP operates approximately 3,300 miles of pipeline, 10 processing plants, and 4 fractionators, and makes money by charging fees for its services. It also buys natural gas and crude oil, and resells it at a profit.

While Crosstex could lose $12.8 million, or 27 cents a share, this year on revenue of $1.6 billion, it could pocket 26.6% of the LP's estimated $217 million in Ebitda (earnings before interest, taxes, depreciation, and amortization). Next year, the LP's Ebitda could rise 14%, to $248 million, due to new projects and acquisitions. One project, the Cajun-Sibon, is a 130-mile NGL pipeline extension of a 440-mile pipeline in central Louisiana. It could come online in mid-2013, and generate $170 million in annual operating income by the end of that year.

CEO BARRY DAVIS SAID in a Nov. 9 conference call that he anticipates Crosstex "will continue to see annual distribution-growth rates of 8% to 10% per year, and dividend growth rates of 20% to 25% per year." The company declined to elaborate, citing a quiet period ahead of Tuesday's 2013 guidance announcement.

Jeffrey Bronchick, chief investment officer of Cove Street Capital, which owns Crosstex shares, says the company could be attractive to an acquirer, given its leverage to the LP's cash flows and the scarcity of publicly traded general partners. Last year, several deals involving GP buyouts occurred at significant premiums. Bronchick pegs the value of Crosstex's shares at $18, but as cash flows ramp up in coming years, that value could rise to $24.